Arguably March 2022 will be a pivotal month for NIO for a number of reasons.
Editor's note: This is a guest post from Rafi Khan, an NIO investor, and does not represent the views of CnEVPost.
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William Li is a problem solver par excellence.
Problem #1 – In 2000 when his co-founders in Bitauto were unhappy with losses of $0.5 million, William Li bought them all out paying them fully what they had invested – after all as he stated it was only money that was causing the problem & he could always earn that doing a job.
Lesson learned at an early age: Money is not the most important commodity. Paramount for William Li was user (investor) experience & he wanted them to be happy.
In 2010 William Li took Bitauto public on NYSE with $500 million market cap so fortunes dramatically changed for the one remaining investor William Li.
Bitauto problem solved!
2010 was also the year of TSLA IPO after which TSLA had a market cap of $2.2 billion.
By 2014 William Li was a billionaire & had founded NIO backed by Who's Who list of Chinese Entrepreneurs – Pony Ma of Tencent, Richard Liu of JD.Com & Lei Jun of Xiaomi.
William Li took NIO public in September 2018 raising $1 billion giving NIO a $6.4 billion market cap.
Money raised was never enough but that was all NIO was able to raise from skeptical, myopic US investors who had witnessed TSLA being close to bankruptcy in 2017-18 period.
Problem #2 – In March 2020, NIO had huge problem – inability to pay employee salaries.
NIO share price collapsed to $2.
City of Hefei came to the rescue. Cohort of ultra loyal NIO owners played their part in NIO's recovery.
NIO share price recovered from $2 to 2020 high of $66.
Along the way NIO built up RMB 47 billion cash mountain.
Cash crunch problem solved.
Problem #3 – Since February 2021 NIO has had Covid related supply chain problems plus product line inadequacies & technology shortcomings:
Not enough automotive chips.
Not enough EV batteries.
Not good enough EV competitor to TSLA Model 3 fast becoming best-selling sedan in the world.
Not good enough EV competitor to TSLA Model Y fast becoming best-selling SUV in the world.
No luxury sedan which could threaten decades long dominance of BBA global German behemoths Mercedes, BMW & Audi.
NIO had the need to match TSLA SiC technology, Giga Press, FSD & other market-leading technologies.
Solution – NIO style
NIO new next-gen platform products (ET7, ET5 & ES7) feature NVDA Orin System on Chip (“SoC”) processors replacing hundreds of chips used in prior models improving safety, graphics, speed & performance.
4 NVDA SOC Chips used by ET7 give 7x raw computing power of TSLA FSD system.
NIO next-gen product line (ET7, ET5 & ES7) use QCOM Snapdragon chip transforming digital cockpit & infotainment user experience replacing old generation chips.
Both NVDA & QCOM SoCs are latest generation, high margin, products being first used in automotive field by NIO so both NVDA & QCOM are incentivized for best results (& full supply to NIO) to consolidate their industry-leading performance attributes.
NIO will get further increase in CATL EV battery supply in late March 2022 per statement by NIO CFO.
Local Chinese media talk of NIO adding second EV battery supplier to supplement CATL supply.
ET5 will directly challenge TSLA Model 3.
Model 3 is fast becoming the best-selling car in the world, recent sales have reached 20,000 plus levels in China & Europe. NIO ET5 matches all range, performance & technology attributes of Model 3 plus having its own BaaS, battery swap, entry price, NIO House, NIO Service, NIO Warranty, NIO Life, AR/VR added attributes.
ES7 will directly challenge both Model Y & BYD Song.
Model Y is fast becoming the best-selling SUV in the World with BYD Song presenting itself as the more affordable Model Y. Though detailed specs have not yet been released it is anticipated that ES7 will be NIO version of Model Y “killer” with a newer, fresher look. First detailed look of ES7 may be mid-April just ahead of Beijing Auto Show April 21, 2022.
ET7, launching in March 2022, seems to have NO viable premium luxury sedan competitor with NIO having already created NIO House, BaaS, battery swap, NIO Life, NIO Quality, NIO User Experience, govt. subsidy moat. Even with just prior generation SUV products NIO was able to dominate the premium luxury segment with 40% market share in 2021 in China.
All NIO's next-gen products deploy SiC technology in the EV powertrain with all its numerous attributes.
Going forward importance of Giga Press to EV assembly process cannot be overstated.
GHT/LK Tech have stated that 6 Chinese companies will receive 8 6,800 ton Giga Presses in “early 2022”. Additionally, they are jointly developing 12,000 ton Giga Press.
It seems likely that NIO has ordered at least one 6,800 ton Giga Press & maybe having 12,000 ton Giga Press being developed by GHT / LK Tech. For sure NIO has made reference to ET5 using large part die-casting.
Indeed TSLA took over the purchase of NIO's Giga Press when NIO experienced financial troubles in 2019/2020 highlighting NIO's long-term belief in use of Giga Press.
Video highlights advantages of Giga Press:
- 20% reduction in labor costs
- 40% reduction in energy consumption
- Reduction in welding needs
- Reduced supply chain needs
- Greater structural integrity
- Reduction of 70 to 200 body parts to 1 or 2 body parts
- Need for 300 to 600 less robots
- Reduction in weight
- Increased production capacity
- Faster production time
- Less likelihood of assembly line faults
Increased CATL battery supply; Second battery supplier; NVDA SoC Orin chips; QCOM Snapdragon chips; 6,800 ton & 12,000 ton Giga Presses coupled with completion of NeoPark in Q2 2022 are coordinated actions with which William Li looks to solve NIO supply chain problems.
Problems solved hopefully – NIO style. Coupled with product line that can challenge best-selling EVs in the World
Focus – NIO Vs TSLA
I have always maintained that TSLA is gold standard by which all EV companies must be judged.
This year TSLA has focused on handling supply chain issues & delayed new product offerings.
Herein TSLA may have given NIO an opening.
NIO has already put its supply chain solutions (detailed above) in place & additionally added products to directly challenge TSLA plus dominate in the premium luxury segment which TSLA has largely abandoned.
Result is NIO has fresher / newer products with numerous advantages in major EV segments & has created big moat in premium luxury already threatening to drown BBA.
You will hardly see BBA EV in streets of Shanghai – Damage may already be irreparable.
NIO will continue to focus on 5-star user experience with profit emanating as a byproduct whilst developing lifelong income streams from BaaS, ADaaS, NIO Life, NIO Service.
TSLA will continue to adopt cost plus approach.
With completion of NeoPark 2022 & introduction of ET7, ET5 & ES7 this will be first year that NIO can directly compete with BBA ICE & EV vehicles for significant market share & also directly challenge TSLA for product superiority.
Pivotal month of March
Arguably March 2022 will be as pivotal a month as March 2020 was when City of Hefei helped solve NIO's cash crunch for the following reasons:
February deliveries – On March 1st with reduced number likely due to CNY & need to produce ET7s which will not show in delivery numbers.
Professional / Car Magazine ET7 Test Reviews – First week of March hopefully highlighting most technologically advanced mass-market car ever produced.
Supply Show & Test ET7s to approx. 500 NIO Houses & NIO Spaces – First week of March.
Retail test drives – Starting March 5th.
Completion phase 1 building works NeoPark – Estimated March 10th.
Production ET7 for delivery – March 11th.
Earnings – Estimated first week of March with road map given for 2022.
Double shift JAC plant – Estimated late March or earlier when NIO gets adequate battery supply.
First deliveries ET7 – March 28th.
March deliveries reported on April 1st, including ET7 deliveries for March 28th to 31st may indicate how quickly NIO was able to ramp up (from the learning curve of producing ET7s from February) which will be subject to NIO rigorous quality control checking.
March 2020 was start of NIO meteoric rise from $2 to $66. Could we see similar sharp rise from March 2022?
Not financial advice, Not an Auto Analyst, Not a Financial Advisor JMHO DYODD